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Crypto CEO Pleads Guilty To “Multi-Billion Dollar Fraud” Will Face Up To 30 Years In Prison (ProCoinNews Vindicated)

Former Celsius CEO Alexander Mashinsky has just plead guilty to massive fraud and now faces 30 years in prison:

Here are more details, from Reuters:

Alex Mashinsky, founder and former CEO of cryptocurrency lender Celsius Network, pleaded guilty on Tuesday to two counts of fraud.

Mashinsky, 59, was indicted on July 13, 2023, on seven counts of fraud, conspiracy and market manipulation charges. Federal prosecutors in Manhattan said he misled customers of Celsius to persuade them to invest, and artificially inflated the value of his company’s proprietary crypto token. He pleaded not guilty that day.

On Tuesday, during a hearing before U.S. District Judge John Koeltl, Mashinsky said he pleaded guilty to two out of the seven counts he was initially charged with:

commodities fraud, and a fraudulent scheme to manipulate the price of CEL, Celsius’ in-house token.

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In court, Mashinsky admitted to giving Celsius customers “false comfort” by giving an interview in 2021 in which he said Celsius had received approval from regulators for its “Earn” program, which it had not. That program offered to deploy customers’ cryptocurrency assets to yield investment returns.

He said he also failed to disclose that he had been selling his holdings of CEL, the platform’s in-house token.

“I know what I did was wrong, and I want to try to do whatever I can to make it right,” Mashinsky said.
As part of his plea deal with prosecutors, Mashinsky agreed not to appeal any sentence of 30 years or less – the maximum he faces for the two counts. Koeltl is set to sentence him on April 8, 2025.

Federal prosecutors in Manhattan have said Mashinsky also personally reaped approximately $42 million in proceeds from selling his holdings of the Cel token.
“Mashinsky made tens of millions of dollars selling his own CEL at artificially high prices, while his customers were left holding the bag when the company went bankrupt,” Damian Williams, the U.S. Attorney in Manhattan, said in a statement on Tuesday.

But major credit goes to ProCoinNews who alerted everyone to the impending collapse the day it was happening…

I remember it like it was yesterday.

ProCoinNews posted the warning to GET YOUR FUNDS OUT and Mashinsky himself responded claiming it was “just a vendor issue” and to “stop spreading FUD”.

Two years later and ProCoinNews is 100% vindicated and Mashinsky is facing spending the bulk of the remainder of his life in prison.

I guess it wasn’t just a “vendor issue” and it was actually not FUD it was FRAUD!  Just two letters off, but very different concepts….

Full report here:

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VINDICATED! Alex Mashinsky Pleads Guilty To Multi-BILLION Dollar Fraud, Max 30 Years In Prison! (No FUD)

VINDICATED! Alex Mashinsky Pleads Guilty To Multi-BILLION Dollar Fraud, Max 30 Years In Prison! (No FUD)

In June of 2022, we Tweeted an urgent warning that logins to Celsius Network were halted by many and we asked if implosion was imminent....

As always, our #1 goal is to keep you SAFE.

So we posted this:

The CEO of Celsius Network himself, Alex Mashinsky replied to our Tweet with this:

If that looks funny, it's because he has locked his Twitter account:

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But we saved that screenshot and now two years later we have been fully vindicated.

Turns out it wasn't just a "vendor issue" and we weren't spreading FUD after all.

Turns out this piece of crap has now PLEAD GUILTY to a multi-billion dollar fraud and he will be doing a max of 30 years in prison!

Take a look:

Hey Alex, care to unlock your Twitter and send us an apology Tweet before you report for PRISON?

30 years is a long time to wait, we'd prefer to just get your apology now.

We'll stand by.

In the meantime, here is the official report from the Department of Justice:

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FULL PRESS RELEASE:

Celsius Founder And Former CEO Alexander Mashinsky Pleads Guilty To Multi-Billion Dollar Fraud And Market Manipulation Schemes

Damian Williams, the United States Attorney for the Southern District of New York, announced today that ALEXANDER MASHINSKY, the founder and former Chief Executive Officer of Celsius Network LLC and their affiliated entities (collectively, “Celsius”), pled guilty to one count of committing commodities fraud and one count of committing securities fraud in connection with two fraudulent schemes at Celsius, the purported “bank” of the crypto industry.  In the first scheme, MASHINSKY misled Celsius’s customers about core aspects of the company he founded, including Celsius’s success and profitability and the nature of the investments Celsius made using customer funds.  In the second scheme, MASHINSKY illicitly manipulated the price of CEL, Celsius’s proprietary crypto token, while he was secretly selling his own CEL token at artificially inflated prices.  As part of his plea, MASHINSKY has agreed to forfeit over $48 million in proceeds from his illegal schemes.  MASHINSKY pled guilty today before U.S. District Judge John G. Koeltl.

U.S. Attorney Damian Williams said: “Alexander Mashinsky orchestrated one of the biggest frauds in the crypto industry.  He lured ordinary, retail crypto investors into investing billions of dollars in Celsius with false promises that their investments were low-risk. Using catchy slogans like ‘Unbank Yourself,’ Mashinsky promised that Celsius would keep customers’ crypto as safe as money in a bank, but that, unlike a bank, Celsius returned most of the profits from its business back to users. In reality, Celsius was never profitable.  To disguise the flaws in his business model, Mashinsky put investors’ money into riskier and riskier bets, and secretly used customer money to prop up the price of CEL token.  Mashinsky made tens of millions of dollars selling his own CEL at artificially high prices, while his customers were left holding the bag when the company went bankrupt.  Today’s convictions reflect this Office’s commitment to holding fraudsters like Mashinsky accountable for their crimes.”

According to the allegations contained in the Indictment and statements made in public filings and in public court proceedings:

Celsius was a crypto asset platform that, among other things, allowed its customers to earn returns on their crypto assets in the form of weekly “rewards” payments, to take loans secured by their crypto assets, and to custody their crypto assets.  Celsius billed itself as the “safest place for your crypto” and urged potential customers to “unbank” themselves by moving their crypto assets to Celsius.  Celsius’s primary public offering was its “Earn” program, through which Celsius offered to deploy customers’ crypto assets to generate investment returns.  In addition to its Earn program, Celsius offered retail investors a “Custody” program and a “Borrow” program, which allowed customers to receive retail loans in exchange for posting their crypto assets as collateral with Celsius.

MASHINSKY directly marketed Celsius to retail customers located in the U.S. and abroad.  Throughout his tenure as CEO of Celsius, MASHINSKY repeatedly made public misrepresentations regarding core aspects of Celsius’s business and financial condition in order to induce retail customers to provide their crypto assets to Celsius and continue to use Celsius’s services. MASHINSKY misrepresented, among other things, the safety of Celsius’s yield-generating activities, Celsius’s profitability, the long-term sustainability of Celsius’s high rewards rates, and the risks associated with depositing crypto assets with Celsius.

As MASHINSKY falsely portrayed Celsius as a safe and secure institution, Celsius’s customer base grew exponentially.  Many of those customers were retail investors rather than large institutions.  By in or about the fall of 2021, Celsius had grown to become one of the largest crypto platforms in the world, purportedly holding approximately $25 billion in assets at its peak.

MASHINSKY and others working at Celsius also orchestrated a yearslong scheme to mislead customers and market participants regarding the market value and interest in Celsius’s proprietary crypto token CEL.  They did so by manipulating the price of CEL through causing Celsius to spend hundreds of millions of dollars purchasing CEL in the open market with the objective of artificially supporting and inflating the price of CEL.  At various times during MASHINSKY’s tenure, MASHINSKY and his co-conspirators also caused Celsius to use its own customer deposits to fund these market purchases of CEL in order to prop up CEL’s price, without disclosing this fact to Celsius’s customers.

Without Celsius’s aggressive and illegal price manipulation, the price of CEL would have been drastically lower. As Roni Cohen-Pavon, Celsius’s Chief Revenue Officer who previously pled guilty to illegally manipulating the price of CEL, wrote to MASHINSKY in a private message exchanged during the scheme: “[T]he issue is that people are selling [CEL] and no one is buying except for us,” adding, “[t]he main problem was that the value was fake and was based on us spending millions (~8M a week and even more until February 2020) just to keep it where it is.”

To further the scheme to manipulate CEL, MASHINSKY also repeatedly made false and misleading public statements concerning the nature of Celsius’s market activity and the extent to which Celsius itself was responsible for artificially supporting and inflating the price of CEL.  In certain instances, MASHINSKY and other Celsius executives also personally purchased CEL for the purpose of artificially supporting CEL’s price.

Artificially inflating the price of CEL allowed MASHINSKY to sell his own CEL holdings for a substantial profit.  MASHINSKY personally reaped approximately $48 million in proceeds from his sales of CEL.  At various times, MASHINSKY made false and misleading public statements about his own sales of CEL, claiming that he was not selling CEL, when, in reality, he was taking advantage of the upward price manipulation he had orchestrated by contemporaneously selling huge quantities of his CEL on the market, including, on occasion, to Celsius itself.

In the lead up to the June 12, 2022 “Pause” of Celsius customer withdrawals, MASHINSKY continued to assure Celsius customers that Celsius was in a strong financial position and had sufficient liquidity to meet all customer withdrawal demands.  Even as he made these statements, however, MASHINSKY had removed approximately $8 million worth of his own non-CEL crypto assets from the Celsius platform.

On June 12, 2022 Celsius announced it was halting all customer withdrawals from the Celsius platform, at which time hundreds of thousands of Celsius customers—many of whom were retail investors—still had approximately $4.7 billion worth of crypto assets on the Celsius platform, none of which they could access.  On or about July 13, 2022, Celsius filed for Chapter 11 bankruptcy.

If you believe you have been a victim of the schemes described above, and you wish to provide information to law enforcement with connection to sentencing or to receive additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office of the Southern District of New York, at 866-874-8900 or [email protected].

*                *                *

MASHINSKY, 58, of New York, New York, pled guilty to one count of commodities fraud and one count of securities fraud, which combined carry a maximum sentence of 30 years in prison.

The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  MASHINSKY is scheduled to be sentenced by Judge Koeltl on April 8, 2024.

Mr. Williams praised the outstanding work of the Federal Bureau of Investigation.  Mr. Williams also thanked the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, each of which has filed a parallel civil action.

The case is being overseen by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Peter J. Davis, Adam S. Hobson, Allison Nichols, and Noah Solowiejczyk are in charge of the prosecution.

Contact

Nicholas Biase, Shelby Wratchford
(212) 637-2600

Updated December 3, 2024

RELATED REPORT:

Did Celsius CEO Alex Mashinsky Get Caught Trying To Flee The Country?

Did Celsius CEO Alex Mashinsky Get Caught Trying To Flee The Country?

An interesting story is developing about Celsius CEO Alex Mashinsky.

Reports are coming out that he attempted to flee the country but was apprehended at the airport.

NOTE: We cannot verify those reports at this time, and accordingly we are not reporting it as fact, but here's what we know so far...

First, he's gone radio-silent: Mashinsky has not tweeted since June 15 after Celsius froze all withdrawals.

This was his last communication:

https://twitter.com/Mashinsky/status/1537147449088872449

ProCoinNews was on the Celsius story the day before the news of the funds freeze broke.

This is what we Tweeted on June 11:

After we personally were unable to login, we started asking questions.

Because that's what journalists do.

Mashinsky himself responded to that Tweet saying "don't create FUD":

https://twitter.com/Mashinsky/status/1535702278300123137

He responded again later that day saying all services were back up and it was "probably just an attack by the same people shorting CEL":

https://twitter.com/Mashinsky/status/1535710192217862151

This was one day before Celsius froze all funds.

FUD (Fear, Uncertainty, Doubt) can exist and still be true...FYI.

I know many people have experienced Fear, Uncertainty and Doubt after their Celsius funds were frozen but it doesn't make the story untrue that the funds are frozen.

Now reports are circulating that Mashinsky attempted to leave the country and was detained.

The first report appears to have come from @MikeAlfred:

https://twitter.com/mikealfred/status/1541233082514124800

Others have also posted:

Blockchain.news reported the following:

Crypto lender platform Celsius Network CEO Alex Mashinsky was reportedly stopped by authorities from leaving the U.S., amid insolvency rumours about his company.

Mashinsky's failed exodus was first disclosed by crypto analyst Mike Alfred on his Twitter account on Sunday local time. He tweeted saying Mashinsky was trying “to leave the country this (last) week via Morristown Airport (in New Jersey) but was stopped by authorities.”

According to Coingape, citing Alfred's prediction, the Ukraine-born CEO was trying to flee to Israel.

Alfred's tweet also added that Mahinsky current whereabouts are unclear. Details about whether he is under custody are yet to be revealed.

The cryptocurrency loan company allows users to deposit cryptocurrency digital assets into a Celsius wallet to earn a percentage yield or take out loans by placing their cryptocurrencies as security.

Currently, the crypto market is under high volatility since the US FED's increase in interest rates in early May 2022.

Rumours about insolvency have been floating around since Celsius decided to freeze withdrawals, swaps or transfers among all accounts in June, citing extreme market conditions. The company has repeatedly claimed that it would take time to resume its operation.

However, the company has started repaying clients to regain liquidity and re-open withdrawals. Recently, Celsius repaid interest-yielding DeFi service Compound Finance with $10 million worth of the DAI stablecoin, according to a report from Crypto Briefing.

We repeat that we have not been able to independently verify the story and it may be inaccurate.

This story continues to develop.

Meanwhile, @Zach_HODL_ON who describes himself as a "100% pure Celsian HODLer" has posted the following, claiming the reports are inaccurate:

https://twitter.com/Zach_HODL_ON/status/1541552905878089728

As with our original reporting on June 11 asking if Celsius was in trouble, time will tell on this one.

Stay tuned, this is a developing story.

We'll continue to report when we have more.


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